The new measure: the new 2005 peer review requirements are here.

• Author: Clavelli, Al
• Position: PEER REVIEW

Organizations must redefine themselves constantly to remain successful, always assessing product development and obsolescence, customer comments and the general business environment.

The same premise applies to the AICPA Peer Review Program. The AICPA Peer Review Board must continually assess the effects of new accounting and auditing pronouncements, increased regulation, and comments from reviewers, reviewed firms and third-party users of peer review reports on the peer review process itself. To make peer review reports more descriptive, increase third-party acceptance and involve reviewed firms more in the process, major changes have been made to the AICPA peer review standards, effective Jan. 1, 2005.

SOME HISTORY

The board began a detailed re-evaluation of the program in 1998 to ensure that it continued to enhance the quality of accounting and auditing work performed, and to emphasize the importance of protecting the public interest. Phase I of this process, effective Jan. 1, 2001, established a three-tiered approach to peer reviews: system, engagement, and report peer reviews.

Phase II included, among other things, researching and analyzing the comments received from regulators and other users of peer review reports. After evaluating responses to its May 2003 exposure draft, which proposed certain changes to the program, the results were finalized and incorporated into the standards.

These revised standards are posted on the AICPA's website, www.aicpa.org/members/div/practmon/2005_stds_notes.htm. The most obvious changes to the standards involve the transparency of the peer review reports and the requirement for firms to provide peer reviewers with written representation letters.

TRANSPARENCY

While the reviewed firm is the primary user of a peer review report, other users include regulatory bodies, such as the U.S. Department of Labor and General Accounting Office; the general public; and in some states, the state board of accountancy. See www.calcpa.org/peerreview for California firm requirements.

To help achieve enhanced transparency for all users, the following significant changes were introduced for system and engagement peer reviews:

* All peer review reports will refer to the letter of comments if a letter of comments is issued.

* If a peer review report expresses an adverse opinion, all deficiencies and related recommendations will be contained in the report and no letter of comments will be issued.

* If a peer review report...